Fiscal System - Economics, UPSC, IAS. | Indian Economy (Prelims) by Shahid Ali PDF Download

Fiscal System

Fiscal System

• Which deals with the receipts and expenditure of the govt.
• The policy governing this system is known as the fiscal policy of the government.
• Ministry of Finance is responsible for the administration of the finances of the government.
• The ministry comprises 3 departments:
  • Department of expenditure
  • Department of revenue
  • Department of economic affairs

Budget

• According to article 112 of the Indian constitution it is the “annual financial statement”.
• Article 113 discusses the procedure to be followed in the formation of budget.

Revenue receipts

Tax Revenue Receipts

• It includes all “Direct & Indirect Taxes”

Non-Tax Revenue Receipts

• It includes:
• Profits, Dividends
• Interest
• Fee / fines
• Grants (external)
• Fiscal service
• General Service like Banking, irrigation etc

Capital Receipts

• Loan recovery
• Borrowings
• Postal deposits

Revenue Expenditure

• Salaries / pensions
• Interest payments
• Subsidies
• Defence expenditure
• Law & order
• Grants
• On social service

Capital Expenditure

• Loan disbursal
• Loan repayments
• Plan expenditure
• Capital expenditure on defence (maintenance of forces, modernization)
• Other liabilities

Plan expenditure

• Done in the name of planning
• These are asset creating or productive expenditures

Non-Plan expenditure

• All consumptive and non-productive expenditures

• * On the suggestions of the Sukhmoy Chakrawarte Committee “Development & Non-Development expenditures” were replaced by “Plan & Non-Plan expenditures” (in public finance literature)

  Data in the Budget

• Actual data of the last year
• Provisional data of current year
• Budgetary estimates for the next year

• Revised estimates (RE)

• A current estimates of either the Budgetary estimates or the Provisional estimates
• It is an interim data

Quick estimates (QE)

• A kind of revised estimates which shows the latest situation
• It is an interim data

Advanced estimates (AE)

• A kind of Quick estimates but done sahead (in advance) of the final stage when data should have been collected
•  It is an interim data

Types of Budgets

• Balanced Budget
• Surplus Budget
• Deficit Budget
• Gender Budgeting
• Outcome and Performance Budget
• Zero based Budget

Outcome and Performance Budget

• It is part of result oriented budgeting
• While outcome budget is presented by different departments the performance budget is presented by Finance department
• Both go for quantitative as well as qualitative progress reports of the performance
• Outcome budget is a micro level process while Performance is a macro level process
• Basic objective is to bring transparency

• Zero based Budget

• first proposed by peter Phyrr;
• first introduced by Jimmy Carter (1979 Budget) in USA
• it is the allocation of resources to agencies based on periodic revaluation y those agencies of the need for all the programmes for they are responsible, justifying the continuance or the termination of each programme